Aluminium yesterday concluded the trading session with a marginal decline of -0.07% at Rs 271.75, influenced by a robust US dollar and resurfacing concerns regarding demand, which negatively impacted market sentiment. Nonetheless, losses were contained owing to enhancing demand outlooks and constrained supply expansion in China. Recent months have seen a strengthening of fund inflows into LME aluminium contracts, indicating a growing optimism that the persistent oversupply may be diminishing, particularly as Chinese production approaches its government-imposed capacity ceiling.

The European aluminium premium increased to $328 from $183 in June, reaching its highest level since February, bolstered by diminished Canadian supply and expected expenses stemming from the EU’s carbon border adjustment mechanism. China has reiterated its commitment to addressing overcapacity in order to alleviate deflationary pressures. Concurrently, SHFE aluminium inventories have decreased by 3.89% compared to the previous week, suggesting consistent consumption levels.

Supply constraints were exacerbated by disruptions at Century Aluminium’s smelter in Iceland and Alcoa’s shutdown of its alumina refinery in Kwinana, Australia. In September, global primary aluminium production experienced a slight increase of 0.9% year-on-year, reaching a total of 6.08 million tonnes. In September, China experienced a 35.4% year-on-year increase in imports of unwrought aluminium and products, totaling 360,000 tonnes, indicative of robust domestic demand.

From a technical perspective, the market is experiencing long liquidation, evidenced by a decline in open interest of -4.45%, settling at 3158, while prices have decreased slightly by Rs -0.2. Aluminium is currently finding support at Rs 270.9, with a potential decline below this level possibly testing Rs 269.8. Conversely, resistance is identified at Rs 273.4, and a breakthrough above this threshold could lead to gains towards Rs 274.8.